SPECIAL FEATURE: Happy Birthday Paradigm
What Bob Hunt doesn’t know about the mortgage market isn’t worth knowing. It may seem a bold statement but Hunt has a career in financial services that spans three decades and it’s fair to say that over that time he’s picked up a few tricks of the trade.
Hunt, 52, joined the financial services industry in 1982 as an independent financial adviser. After working for the Hill Samuel Group for ten years in 1994 he was headhunted by Abbey Group where he stayed for more than a decade.
Describing himself as “gatekeeper turned poacher”, Hunt is in the unusual position of knowing how a lender thinks but also what the distribution strategies of his competitors look like.
“I have been lucky enough to have the right experiences throughout my career which have put me in a perfect position for setting up a distribution business tailored to the needs of lenders because I know what they want,” he says.
In 2003, along with Ambrose McGinn, he founded Abbey For Intermediaries before moving on to his final position with the group as director of key accounts.
“Throughout my 12 years at Abbey I worked with intermediaries. I watched how they worked and I watched regulation appear and take form right from the creation of the Financial Services Authority to the arrival of M Day in 2004.”
In 2007 his friend Paul Hogarth, one of the founders of Bankhall, set up Paradigm Partners. Within six months Hunt was asked to establish its mortgage club proposition with former head of The Mortgage Alliance (TMA), John Coffield. He knew then he was well equipped to bring a different offering to the distribution sector.
“We had a blank sheet of paper on which to design a distributor exactly how we wanted it to be. And using discussions with the major lenders to guide us we thought about how we could add value to an already crowded market.
“What Paul, John and I needed to figure out was how we could persuade brokers who were comfortable with their existing distributor to take a chance and try something new.”
What they came up with was two ways to reward their members; a profit sharing scheme and a share in the equity of the company.
So far this year Paradigm Group has distributed £750,000 of profit share income to its members on top of the usual procuration fees which all advisers earn from being part of a club.
But giving away equity in the company is Paradigm Mortgage Services’ real USP.
“When we set up the company 50% of the equity was placed in trust for our members so that when we decide to sell or float the company in the future members are entitled to a proportion of that equity,” says Hunt.
“Members grow the value of a business they own in line with their contribution to that business.”
But Paradigm Mortgage Services are particular about who they let into their club. “It’s not right for everyone,” says Hunt. “And not everyone is right for us.”
Paradigm has built its business around the quality of its membership.
In October 2007 Paradigm Mortgage Services began with 500 registered individuals and over the past five years has grown to over 2000 RIs through word of mouth and referrals.
From day one Hunt recognised that sooner or later lenders would be looking at distributors’ members and scrutinising their internal quality metrics and compliance procedures.
“The Financial Services Authority’s know your broker initiative was no surprise to me,” he explains. “Five years ago I said that lenders need to think about who their distributors deal with, how those firms check their cases and how they work with those firms to change and improve behaviours.
“I focused on the quality of business from the start and I don’t think it was clever on my part it was just obvious. There was a gap in the market for a club with our values and I filled it whereas our competitors have grown as simply volume aggregators.”
So it was no surprise that when Hunt was asked about his opinion of quality linked proc fees his response was simply: “It’s about time!”
Paradigm Group’s recent decision to sell off network, Paradigm Financial Advisers, is all part of the same strategy to remain true to its original focused objectives of supporting quality-driven directly authorised brokers.
Hunt said the network which it set up in response to its members’ requests had become a pull on its resources and he felt the network would be better supported by a company more in tune with its needs.
Now able to focus entirely on directly authorised brokers what does the future hold for Paradigm Mortgage Services?
Hunt has a glint in his eye which suggests he isn’t going to give away all his secrets – at least not yet, anyway.
“We started this business to create value for our members, manufacturer partners and us and when the time is right we will sell the business and realise that value,” he says confidently.
But until that time comes Paradigm Mortgage Services will continue to battle through tough trading conditions, growing and making a profit for its stakeholders.
“We are still a young business and when conditions improve who knows what we will be able to achieve and that is the way I like it. The moment you say you have reached your peak performance you are already in decline.”
And with an attitude like that, it’s fair to say that Paradigm Mortgage Services members will be in line for their just desserts.